Europe delays, US ‘fiscal cliff’ threaten growth: G20

British Chancellor of the Exchequer George Osborne (R) speaks during a news conference next to Germany’s Finance Minister Wolfgang Schaeuble at the G20 Summit in Mexico City. Photo: Reuters

G20 powers have warned that possible delays in Europe’s anti-crisis measures and a potential sharp fiscal tightening in the United States threaten global growth.

The communique also cited “weaker growth” in some emerging nations and “additional supply shocks” in some commodity markets as threats to the world economy.

“Global growth remains modest and downside risks are still elevated, including due to possible delays in the complex implementation of recent policy announcements in Europe, a potential sharp fiscal tightening in the United States, securing funding for this year’s budget in Japan,” Group of 20 finance chiefs said in a statement on Monday, after a two-day meeting in Mexico City.

The euro zone debt crisis and a looming US “fiscal cliff” were the focal points during two days of talks among finance ministers and central bankers from the Group of 20 leading developed and emerging economies.

The finance ministers committed to doing “everything necessary to strengthen the overall health and growth of the global economy”.

“Our main focus in the period ahead will be to rebuild confidence and to reduce risks and volatility in international financial markets; contribute to a faster pace of economic recovery and job creation, and promote the foundations for strong, sustainable, and balanced growth,’’ the statement said.

The communique reaffirmed the G20’s commitment to improving the transparency and functioning of commodity markets amid market volatility and committed to reporting progress on work towards better functioning commodity markets ahead of the 2013 meeting.

“Leaders recognised that excessive commodity price volatility has significant implications for countries, increasing uncertainty in the economy, and endorsed the conclusions of a report on the macroeconomic impacts of excessive commodity price volatility on growth,” it said.

The United States faces automatic spending cuts and tax hikes in January that could harm the US economy and global growth unless the White House and Congress reach a compromise before then.

“The United States will carefully calibrate the pace of fiscal tightening to ensure that public finances are placed on a sustainable long-run path while avoiding a sharp fiscal contraction in 2013,” the G20 statement said.

But G20 officials acknowledged that any resolution to the fiscal cliff will have to wait until after Tuesday’s US presidential election, with incumbent Barack Obama facing a tight race with Republican rival Mitt Romney.